JUDGMENT No. 21 Ber Corres stees —" IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G.489 of 1986 ) GENERAL DIVISION ) BETWEEN: COMMISSIONER OF AUSTRALIAN FEDERAL POLICE =O Applicant BRUCE RICHARD CORNWELL Respondent EX-TEMPORE REASONS FOR JUDGMENT BURCHETT J. This is an application for an order under 8.243F of the Customs Act 1901 in relation to property of which, by a previous order of the Court, the Official Trustee was directed to take control. The order sought, if granted, would authorize the Official Trustee to sell certain of the property, consisting of a mare known as Singing our Song and certain progeny of that mare. Section 243F takes its place as part of the series of provisions dealing with the recovery of pecuniary penalties for dealings in narcotic goods. Under those provisions, which commence with s.243A, pecuniary penalties may be recovered in 2. respect of benefits derived by a person by reason of his having engaged in a particular proscribed narcotics dealing, or engaged during a particular period in proscribed narcotics dealings. By s.243B, where the Court is satisfied that the person in relation to whom the order is sought has so engaged in a narcotics dealing or narcotics dealings, the Court shall assess the value of the benefits derived by the person by reason of his having done so, and order the person to pay to the Commonwealth a pecuniary penalty equal to that value. Provision is made, in s.243c, for the assessment, and particularly in relation to the evidence upon which the Court makes the assessment. An important provision for present purposes is 6.243E, under which, where a proceeding has been instituted for a pecuniary penalty, an application may be made to the Court, ex parte, for an order directing the Official Trustee to take control of property specified in the application, or of all the property of the defendant. It is provided by subsection (2) of that section that, where such an application is supported by an affidavit of an appropriate person specified in the subsection stating that he believes certain matters and setting out' the grounds on which he holds those beliefs, and where the Court considers that, having regard to the matters contained in the affidavit or affidavits, there are reasonable grounds for holding those beliefs, the Court shall make such an order. It is to be emphasized that 8.243E(2) is expressed imperatively, that is to say, in language which appears to leave no discretion, provided the Court is satisfied on the matters I have mentioned. 3. The section goes on to provide for other matters which may be included in the order. I note that, among them, it is provided that the Court may make provision for meeting the reasonable living and business expenses of the defendant out of the property. Some protection is afforded a defendant, insofar as there is also specific provision relating to the giving of undertakings with respect to the payment of damages or costs in relation to the making and operation of the order. By 8.243F, which is the section under which the present application is made, it is provided that, where the Court has made an order under s.243E directing the Official Trustee to take control of property, the Court may at the time it makes' the order, or at any subsequent time, make such orders in relation to that property as the Court considers just. Without limiting the power so conferred on the Court, it is provided that the Court may at the time or at any subsequent time make an order - and then there are set out a number of matters, including paragraph (b), an order: "regulating the manner in which the Official Trustee may exercise its powers or perform its duties under the original order." By 8.243G, it is provided that where an order is in force under s.243B in relation to a person who has been ordered to pay a pecuniary penalty to the Commonwealth, the Court may make an order directing payment out of the property of the person controlled by the Official Trustee; and express provision is made that, for the purpose of enabling the Official Trustee to comply 4. with the direction, the Court may direct him to sell or dispose of such of the property as is specified. Provision is also made by s.243J that, where an order is made under s.243E, there is created by force of this section a charge on all property to which the order relates to secure the payment to the Commonwealth of any pecuniary penalty that the person may be ordered to pay in the relevant proceeding. There is then provision for that charge to cease to have effect in a number of events. The respondent Cornwell points out, in argument, that those events do not include a sale pursuant to a direction under 8.243F, but do expressly include a sale or other disposition in pursuance of an order under s.243G, or by the owner of the property with the consent of the Court or of the Official Trustee. There is also a general provision in paragraph (f) for the charge to cease to have effect upon the sale of the property to a bona fide purchaser for value who, at the time of purchase, has no notice of the charge. By 6.243M(4), provision is made in respect of a case where the Official Trustee has been directed by an order under g.2438 to take control of a business - and, as might be expected, this provision clearly contemplates that the Official Trustee might have to make payments of outgoings in order to carry on the business over which he has taken control. To that extent at least, it is certainly clear that he does not simply take over assets which have been frozen, but is able to deal with then. By 8.2438, jurisdiction is conferred on the Court to hear and determine applications under these provisions. It seems to me that the terms of 5s.243F do involve a broad discretion. They are quite similar to the terms of 5.50 of the Bankruptcy Act 1966, which empowers the Court, in an appropriate case, to direct a trustee to take control of the property of a debtor, and empowers the Court to make such orders in relation to that property as the Court considers just. These, it will be noted, are precisely the words of 8.243F. In Re Morrison; Ex parte Shoreline Currencies (Australia) Pty Limited (in liquidation), unreported, 19 December 1986, I held that 8.50 enabled the Court, in the special circumstances which were there in evidence, to direct a receiver that he might proceed to complete a contract for the sale of land of the debtor, the debtor having previously signed the contract. The debtor was not available to give instructions as to its completion; and, of course, the land was under the control of the trustee by virtue of an order, made under 8.50 subsequently to the date of the contract. I said: "The Court is empowered by 8.50 to ''make such orders in relation to that property as the Court considers just.' That is extremely general language. The words 'in relation to' have been authoritatively given avery long reach in Regina v. Murph (1985) 61 A.L.R. 139 at 145. In 5.50, this extremely general language is intended, in my opinion, to confer wide powers to enable the objects of the section to be effectually carried out in the multiplicity of various situations which may be expected to arise. This language should not be restrictively construed." I also said: "The words of s.50 'to take control of the property of the debtor' import in themselves considerable powers: cf. Australian Industr Development Corporation Vv. Co-operative Farmers an raziers rec Mea Su e A.C.L. , especially a Pp-553-554." However, I added: "(W)hile the power conferred by 8.50 should be accepted as extensive, its exercise must be restrained by considerable caution. The section is concerned with cases where a sequestration order has not yet been made, and it may never be made." That comment is applicable to the situation in cases, such as the present, where an order assessing a pecuniary penalty also has not been made, and may never be made; or, if made, may not extend to a sum such as to produce any inevitable effect upon the assets the subject of the application. It seems to me that the intention of the legislature in adopting this language, so similar to the language contained in 8.50 of the Bankruptcy Act, is to provide for a control by the Official Trustee sufficient to ensure that he is not impotent to deal with serious problems; and that those assets which are of an inevitably wasting or perishable nature, or which otherwise require to be disposed of, may be capable of being disposed of. I have been referred to the decision in Re Wells v. Croft; Ex parte the Official Receiver (1695) 72 L.T. 359. That decision, I think, is not contrary to my own decision in Re Morrison. 7. For those reasons, I think there is power to make an order of the kind sought, but s8.243G and 2433 clearly suggest that a sale of property is not contemplated as a normal incident of control - only as an incident of the situations to which the provisions in those sections directly refer. This comment relates to a sale of capital assets, and not to the sort of sales which are inevitably incidental to the conduct of a business. There is the provision already referred to which shows that control of a business is certainly within these sections. The next question is whether, in this case, the orders sought should, as a matter of discretion, be made. The original order was made in August 1986, and this motion comes before me in March 1988, having been recently taken out. The evidence shows, and I accept, that there clearly are difficulties for the trustee in dealing with these horses. He has the problem of ensuring that they are looked after, and of meeting the outgoings involved. As against that, the assets appear to be ample _ to provide what is necessary for that purpose. There is a peculiar difficulty in respect of insurance, which appears to arise out of the perception which insurers have of the activities undertaken in the past by the respondent himself. There is also the problem that, of their nature, horses age over time, and this may affect their value. However, the time that would be involved in that having a severe effect might well be atime within which the problems of this particular case may be resolved. The fact is that no order has been made assessing pecuniary penalties. At the present time, the property belongs to the respondent. He has been convicted of an offence in relation to narcotics dealings, and sentenced to a long term of imprisonment, but at the present time the application for the assessment of a pecuniary penalty has not been brought on for hearing. As I have said, it must be taken at the present time that it is possible that no penalty may be assessed. A penalty does not automatically follow because of a conviction in respect of a narcotics dealing. At the present time, the property belongs to the respondent. It seems to me that the Court should be slow to dispose of a person's property against his will, unless it is clearly shown both that the circumstances have arisen which empower the Court to make such an order, and that such an order is in fact necessary. The provisions with which we are concerned here are extremely severe. The seizure of property occurs before proof of anything more than that there are reasonable grounds for the requisite belief. The spirit of the provisions is clearly that the problems of drug trafficking, and the enormous profits which it may accumulate, do demand severe measures. Nothing that I have said, or will say, can be taken to evince a view other than one of acceptance of the policy of the provisions. But the fact is, in this case, it has not as yet been shown that the respondent is a person who should pay a pecuniary penalty, and whose property should be made available for that purpose. The property has been dealt with under provisions which are rather by way of creating a statutory charge to ensure that, if such a penalty ever is assessed, it will be able to be 9. enforced. In all the circumstances, I am not persuaded that it is a case in which I should make an order having the effect of disposing of the respondent's property at this time. I hold that there is power, under these provisions, to make an order in an appropriate case, but it should be exercised sparingly, and only where it is really necessary. In this case, it has not proved necessary over what is now quite a lengthy period, and there is nothing to stop an early hearing of the claim for a pecuniary penalty. My decision does not prevent a further application, if the circumstances in relation to the matter, or these horses in particular, should change, or if it becomes possible to show clearly that there is a real need for some further order to be made. For those reasons, I dismiss the application. Is there anything further, gentlemen? MR. CULLEN: I make an application for costs. MR. ALLATT: I submit that they should be paid out of the estate eventually. This is a matter where the Official Trustee has brought an application in the belief that it was a proper application to bring. HIS HONOUR: Provision is made for an undertaking as to damages and costs. You told me such an undertaking was given in this case. MR. ALLATT: There is an undertaking given on behalf of the Australian Federal Police. 10. HIS HONOUR: It would not be appropriate that damages be paid prior to it being ascertained whether there is a penalty. The appropriate order might be to make an order for costs to be paid out of the estate, but to reserve any question of whether the estate should be recouped under the undertaking given at the time the order under s.243E was made. Would that seem appropriate? MR. ALLATT: Yes. MR. CULLEN: Yes. HIS HONOUR: I do not think you should automatically be recouped in that way, although that might ultimately be the case. At this stage I think I should reserve that. I make an order that the costs of the respondent Bruce Richard Cornwell be paid at this stage out of the estate under the control of the Official Trustee, but I reserve his right to seek to have that recouped pursuant to the undertaking which was given at the time the order under s.243E was made. I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. Aiur didhor Associate Dated: 30 March, 1988 11. Solicitor for the Applicant: Solicitor for the Respondent: Solicitor for the Official Trustee: Date of hearing: H. virs (Director of Public Prosecutions) J.J. Cullen of J.d. Cullen 6& Associates M. Allatt (Australian Government Solicitor) 30 March 1988